Tax Basis

PRESIDENT Bush's proposal to eliminate the income tax that investors pay on dividends has generated speculation about winners and losers. At first, it seemed as if the winners would be dividend-paying stocks, especially preferred shares that pay high dividends. Among the potential losers, it seemed, would be tax-free municipal bonds that would face new competition from stocks and 401(k) investors who would still have to pay income tax on reinvested dividends once they took money out of the plan.

Q. Your article about variable annuities with a lifetime income guarantee was interesting. Could you explain in more detail the differences between this benefit and annuitization? A. I wrote about a relatively new lifetime income benefit rider offered by several insurance companies that issue variable annuities. With this optional benefit, which comes at an extra cost, the annuity purchaser can choose to receive a minimum lifetime income regardless of how the annuity investments perform and without having to "annuitize," or give up access to principal.

Lockheed Martin Corp. will no longer offer traditional pensions and post-retirement health care contributions to new salaried employees to cut costs. New hires as of Jan. 1 will not be eligible for defined-benefit pensions and will instead be provided a defined-contribution plan, Bethesda-based Lockheed said in a note to 85,000 salaried workers yesterday. That will save the company at least $125 million over the next 15 years, said Chief Financial Officer Christopher Kubasik. Lockheed's contributions to retiree health plans and pensions have almost doubled in the past two years as investment returns haven't kept pace with rising benefit payouts.

Washington -- With the holiday gift-giving season in full swing, here's an innovative way to raise cash -- $500, $1,000 or more with virtually no effort -- to help you defray some of the season's expenses.And get this: The source of this ready cash is none other than the biggest Grinch of all -- the Internal Revenue Service. All you have to do is fit this description:L * You bought a home between Dec. 31, 1990, and Jan. 1, 1994.* You financed it with a mortgage or deed of trust that included "points."

Black & Decker Corp. said yesterday that an overhaul of the company announced in January resulted in a first-quarter loss of $971.4 million.The Towson-based company, which plans to sell most of its household product business and cut an additional 3,000 jobs worldwide, said it had charges of about $1 billion.Those included the write-off of good will -- or excess over book value paid for acquisitions -- of about $900 million. The charge mainly involves Black & Decker's Emhart Corp. unit, which the company bought in 1989 for $3.5 billion in cash and assumed debt.

The baseball season hasn't started yet, but Sammy Sosa has already delivered a solid hit this spring - to the first-quarter profit of Chicago Cubs owner Tribune Co. As sports-page readers know by now, the Cubs were so eager to send Sosa packing that they agreed over the winter to pay about $16 million just to get out of the last year of their contract with the outfielder, who was traded to the Orioles. Now, as it turns out, corporate-accounting rules require Tribune to publicly spell out in its first-quarter financial results the cost of pushing Sosa out the dugout door.

Dear Mr. Azrael:A few years ago, my wife and I bought a "handyman special," fixed it up and rented it out.The labor and repair costs have since become a burden. We believe we could sell this property for an amount sufficient to pay off both that mortgage and the mortgage of the house where we live.We are concerned, however, about taxes on the sale of the house and also about losing the tax advantages of owning a rental property. Would it be a smart move financially to sell this rental property and pay off our home mortgage, too?

WASHINGTON -- If you own any type of investment real estate -- a small rental condo, a place at the beach, an apartment building -- you could be directly affected by a controversial capital-gains tax proposal under discussion here by congressional and Clinton administration budget balancers.Sources close to the budget negotiations confirm that to raise revenue while cutting overall capital gains taxes, negotiators have seriously considered eliminating a key, traditional benefit enjoyed by real estate owners.

Crestar Financial Corp. said yesterday that it expects to take a $16 million charge on an after-tax basis for expenses relating to its merger with Loyola Capital Corp.In addition, the company could face one-time charges in the fourth quarter totaling $34 million if Congress forces banks to pay to recapitalize the savings and loan industry's ailing insurance fund. If Crestar ends up paying the maximum amount -- $50 million -- it could cost the company about one quarter's worth of earnings.

Q: I am a joint-tenant owner of my house with another man, who is 55 years old. May we sell the house and let him claim his $125,000 exemption on the profits, allowing me to save my $125,000 exemption until I turn age 55?A: As unmarried joint tenants in a principal residence, you each qualify for a $125,000 exemption on the profits from your home sale. But to exercise this exemption, you must be at least 55 and have lived in the house for three of the last five years.You may not use your exemption until you turn 55, regardless of what your housemate does.